Supreme Court Holds that the “First Sale” Doctrine Applies to Copies of Copyrighted Works Lawfully Made Abroad

Copyrighted works imported into the United States from abroad are subject to the same “first-sale” rules as items purchased in the United States, according to a Supreme Court decision issued last month (Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697).

Supap Kirtsaeng, a citizen of Thailand, came to the United States in 1997 to study mathematics at Cornell University and the University of Southern California. While working on his degrees, Kirtsaeng asked friends and family in Thailand to buy copies of foreign edition English language textbooks in Thailand, where they were sold at low prices, and mail them to him in the United States, where he then sold the books, reimbursed his family and friends, and kept the profit.

Publisher John Wiley & Sons commenced a copyright infringement lawsuit against Kirtsaeng in 2008, alleging that Kirtsaeng’s resale of the books infringed on Wiley’s exclusive right to distribute under §106(3) of the Copyright Act. Kirtsaeng countered that he had acquired the books legitimately and that the “first-sale” doctrine codified in §109(a) of the Copyright Act allowed him to resell or otherwise dispose of the imported books without permission from the copyright owner.

The first-sale doctrine is a limitation on the exclusive right of copyright owners to distribute copies of their work under the Copyright Act. The first-sale doctrine provides:

Notwithstanding the provisions of §106(3) [the section granting the owner exclusive distribution rights], the owner of a particular copy or phonorecord lawfully made under this title . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

Kirtsaeng’s defense, therefore, was that although §106(3) forbids distribution of a book without the copyright owner’s permission, once he lawfully obtained a copy, he was free to dispose of it as he wished. Essentially, that “first sale” in Thailand, Kirtsaeng argued, exhausted the copyright owner’s exclusive distribution right under §106(3).

However, the District Court sided with Wiley at trial, finding that the first-sale defense did not apply to “foreign-manufactured goods.” On appeal, the Second Circuit agreed, noting that the first sale doctrine applies only to “the owner of a particular copy . . lawfully made under this title.” According to the Second Circuit, works made abroad could not have been made “under this title” or under American law, and thus the first-sale doctrine was inapplicable.

But the Supreme Court rejected this argument last month, holding that the first-sale doctrine indeed applied to copies of copyrighted works lawfully made abroad. Writing for the majority, Justice Breyer noted that the phrase “lawfully made under this title” was not intended to exclude works made overseas. (The Court also observed that “geographical interpretations create more linguistic problems than they resolve.”) Instead, the Court focused on the serious consequences of upholding the Second Circuit’s analysis, such as preventing a buyer in the United States from selling or giving away copies of a foreign film or a dress made abroad, finding that this scenario could not possibly have been the legislative intent.

The Court’s decision in Kirtsaeng affirmatively settled a long ambiguous question as to whether the first-sale doctrine applied to copyrighted works manufactured abroad and imported into the United States. The Supreme Court had previously held in Quality King Distributors, Inc. v. L’Anza Research International, Inc., 523 U.S. 135 (1998) that the first-sale doctrine applied to works manufactured in the United States but first sold outside the United States, then imported back. But the Quality King court never resolved the issue ultimately decided in Kirtsaeng as to the more common situation in which copyrighted works manufactured abroad are then imported into the United States.

The Kirtsaeng decision may result in lower prices in the United States on copyrighted works such as books, because publishers can no longer use American copyright law as a basis to sell similar versions of the same work at greatly varying prices depending on the country. But, copyright owners may respond by localizing their offerings in particular markets so that, for example, the English language version of a textbook sold in Thailand would no longer serve as an adequate substitute for the American version of the same book. Others may rely more heavily on encoding products in region-specific formats, so that a DVD purchased in one country will not play on a player in another country. Undoubtedly, although long awaited, the Court’s decision will not be the last word on this issue.